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DCAA Timekeeping Lore

Scale balancing time and moneyMany moons ago, I was visiting with a client who told me that they had developed an electronic timekeeping system for their internal use. Things were going well until such time they received a surprise DCAA real-time labor evaluation also known as a "floor check". When the auditor discovered that the software allowed a user the ability to charge time to a direct cost objective (i.e., contract) to days in the future, it was determined the labor charging system lacked a key internal control and was deemed inadequate. The auditor's report recommended fixing the flaw of allowing future time charges to billable jobs or returning to paper timesheets. At the time of my visit, the CFO wondered how going back to paper timesheets would somehow prevent the entry of future time against a billable contract, not that they were guilty of authorizing such charges.

When it comes to your employees and other team members filling out timesheets, we typically presume that the regulations from which the DCAA gets its authority to enforce timekeeping rules are embedded in the Federal Acquisition Regulations (FAR) and/or the Defense Acquisition Regulations Supplement (DFARS). Furthermore, as part of an onboarding process, employees joining the staff of a labor-intensive Federal Contractor soon learn about the compliance rules for recording direct and indirect labor charges. These procedures include filling out timesheets on a daily frequency, not allowing other staff members make time entries on another's behalf, accurately charging time to the correct job order number, and training for making corrections to previously recorded time entries. These practices and other related guidance surrounding labor recording can be found in DCAAM 7641.90 under Labor Charging System. So that's the final word, right? If guidance is written in the DCAA's Information for Contractors manual, then it must be rooted in the regulations (i.e., the FAR), correct? It might surprise you to learn the answer to this supposition is false.

In searching through the voluminous FAR and DFARS, the words "timekeeping" and "timecard" are only referenced sporadically in a few "Parts". There is the SF1408 criterion, "A timekeeping system that identifies employees' labor by intermediate and final cost objectives" found in DFARS 252.42-7006. There is a reference to "individual daily job timekeeping records" in support of Payments under Time-and-Materials and Labor Hour Contracts (FAR 52.232.7). However, the "daily" relates to daily entries in support of a voucher, but nowhere does the regulation explicitly state that the time entries must be recorded on a daily frequency when working on a T&M contract. Since there is no time frequency specified, one can interpret this to mean there are no restrictions for waiting until the end of the workweek or labor period to record daily hours worked on the contract. While FAR 31.205-2 addresses record keeping in a broad sense in support of costs incurred, it does not specifically mention timekeeping or the need to complete timesheets daily or anything else that can be tied to the guidance set forth in DCAAM 7641.90. And "guidance" is the operative word as opposed to "regulation". Should an auditor raise concerns during the course of a floor check audit that a particular staff member has not completed his or her timesheet on a daily basis, you technically could ask the auditor to cite the regulation in support of enforcing time entries on a daily frequency.

And what about the requirement to not allow for future time charges to billable contracts? While there is no direct reference to this contained in the FAR or in DCAAM 7641.90, there are plenty of references to fraud throughout the FAR. There is a catch-all paragraph under Labor Charging System in 7641.90 entitled Penalties for Labor Mischarging. To wit, "(1) The manipulation of charges to a contract may be subject to criminal charges under 18 United States Code (U.S.C.) 1001." 

As the publisher of SYMPAQ eTX for timekeeping, we take all guidance and regulations into account while developing a particular feature set or internal control. While it could be said that SYMPAQ is a "FAR compliant" cost accounting system, labor charging falls under the domain of DCAA compliance. To ensure compliance with the guidance, we've built in the business rules that remind staff members to complete their timesheets on a daily basis while preventing future time charges against direct contracts. While it can be argued that what isn't written in the FAR or DFARS doesn't hold water, adopting good common sense rules for timekeeping reduces labor mischarges and the potential for fraud. 

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